THE SECRETS TO

SUCCESSFUL STRATEGY
EXECUTION
Article Review

Group Members: Abdul Samad

Nasir Shahab
Sohaib Sohail
Ammar Ali

Games of Strategy
Abstract:
This article published in Harvard Business Review, is written by authors Gary L.
Neilson, Karla L. Martin and Elizabeth Powers.

“Research shows that enterprises fail at execution because they go straight to

structural reorganization and neglect the most powerful drivers of
effectiveness— decision rights and information flow.”

A brilliant strategy may put you on the competitive map. But only solid
execution keeps you there. Unfortunately, most companies struggle with
implementation. That’s because they rely heavily on structural changes, such
as reorganization, to execute their strategy.

Though structural change has its place in execution, it produces only short-
term gains. For example, one company reduced its management layers as part
of a strategy to address disappointing performance. Costs plummeted initially,
but the layers soon crept back in.

According to the authors, "Execution is the result of thousands of decisions

made every day by employees acting according to the information they have
and their own self-interest."
Their research identified four fundamental building blocks executives can use
to influence those actions:
1. Clarifying decision rights (setting expectations)
2. Designing information flows (making sure people are on the same page,
have the right information to do their jobs)
3. Aligning motivators (recognition and rewards consistent with attitudes,
behaviors)
4. Making changes to structure
Introduction:
A brilliant strategy, blockbuster product, or breakthrough technology can put
you on the competitive map, but only solid execution can keep you there. You
have to be able to deliver on your intent. Unfortunately, the majority of
companies aren’t very good at it, by their own admission. Over the past five
years, thousands of employees have been invited by authors (about 25% of
whom came from executive ranks) to complete an online assessment of their
organizations’ capabilities, a process that’s generated a database of 125,000
profiles representing more than 1,000 companies, government agencies, and
not-for-profits in over 50 countries. Employees at three out of every five
companies rated their organization weak at execution—that is, when asked if
they agreed with the statement “Important strategic and operational decisions
are quickly translated into action,” the majority answered no.

Execution is the result of thousands of decisions made every day by employees

acting according to the information they have and their own self-interest.
In efforts to improve performance, most organizations go right to structural
measures because moving lines around the org chart seems the most obvious
solution and the changes are visible and concrete. Such steps generally reap
some short-term efficiencies quickly, but in so doing address only the
symptoms of dysfunction, not its root causes. Several years later, companies
usually end up in the same place they started. Structural change can and
should be part of the path to improved execution, but it’s best to think of it as
the capstone, not the cornerstone, of any organizational transformation. In
fact, research of the authors shows that actions having to do with decision
rights and information are far more important—about twice as effective—as
improvements made to the other two building blocks.

Take, for example, the case of a global consumer packaged-goods company

that lurched down the reorganization path in the early 1990s. Disappointed
with company performance, senior management did what most companies
were doing at that time: They restructured. They eliminated some layers of
management and broadened spans of control. Management-staffing costs
quickly fell by 18%. Eight years later, however, it was deja vu. The layers had
crept back in, and spans of control had once again narrowed. In addressing
only structure, management had attacked the visible symptoms of poor
performance but not the underlying cause—how people made decisions and
how they were held accountable.
This time, management looked beyond lines and boxes to the mechanics of
how work got done. Instead of searching for ways to strip out costs, they
focused on improving execution—and in the process discovered the true
reasons for the performance shortfall. Managers didn’t have a clear sense of
their respective roles and responsibilities. They did not intuitively understand
which decisions were theirs to make. Moreover, the link between performance
and rewards was weak. This was a company long on micromanaging and
second-guessing, and short on accountability. Middle managers spent 40% of
their time justifying and reporting upward or questioning the tactical decisions
of their direct reports.
Armed with this understanding, the company designed a new management
model that established who was accountable for what and made the
connection between performance and reward. For instance, the norm at this
company, not unusual in the industry, had been to promote people quickly,
within 18 months to two years, before they had a chance to see their initiatives
through. As a result, managers at every level kept doing their old jobs even
after they had been promoted, peering over the shoulders of the direct reports
who were now in charge of their projects and, all too frequently, taking over.
Today, people stay in their positions longer so they can follow through on their
own initiatives, and they’re still around when the fruits of their labors start to
kick in. What’s more, results from those initiatives continue to count in their
performance reviews for some time after they’ve been promoted, forcing
managers to live with the expectations they’d set in their previous jobs. As a
consequence, forecasting has become more accurate and reliable. These
actions did yield a structure with fewer layers and greater spans of control, but
that was a side effect, not the primary focus, of the changes.

Strong Execution:
The conclusions of the authors arise out of decades of practical application and
intensive research. Nearly five years ago, the authors and their colleagues set
out to gather empirical data to identify the actions that were most effective in
enabling an organization to implement strategy. What particular ways of
restructuring, motivating, improving information flows, and clarifying decision
rights mattered the most? They started by drawing up a list of 17 traits, each
corresponding to one or more of the four building blocks they knew could
enable effective execution—traits like the free flow of information across
organizational boundaries or the degree to which senior leaders refrain from
getting involved in operating decisions. With these factors in mind, they
developed an online profiler that allows individuals to assess the execution
capabilities of their organizations. Over the next four years or so, they
collected data from many thousands of profiles, which in turn allowed them to
more precisely calibrate the impact of each trait on an organization’s ability to
execute. That allowed the, to rank all 17 traits in order of their relative
influence.

The 17 Traits:
1. Everyone has a good idea of the decisions and actions for which he or she is
responsible.
In companies strong on execution, 71% of individuals agree with this
statement; that figure drops to 32% in organizations weak on execution.
Blurring of decision rights tends to occur as a company matures. Young
organizations are generally too busy getting things done to define roles and
responsibilities clearly at the outset. And why should they? In a small company,
it’s not so difficult to know what other people are up to. So for a time, things
work out well enough. As the company grows, however, executives come and
go, bringing in with them and taking away different expectations, and over
time the approval process gets ever more convoluted and murky. It becomes
increasingly unclear where one person’s accountability begins and another’s
ends. One global consumer-durables company found this out the hard way. It
was so rife with people making competing and conflicting decisions that it was
hard to find anyone below the CEO who felt truly accountable for profitability.
The company was organized into 16 product divisions aggregated into three
geographic groups—North America, Europe, and International. Each of the
divisions was charged with reaching explicit performance targets, but
functional staff at corporate headquarters controlled spending targets— how
R&D dollars were allocated, for instance. Decisions made by divisional and
geographic leaders were routinely overridden by functional leaders. Overhead
costs began to mount as the divisions added staff to help them create
bulletproof cases to challenge corporate decisions. Decisions stalled while
divisions negotiated with functions, each layer weighing in with questions.
Functional staffers in the
divisions (financial analysts, for example) often deferred to their higher-ups in
corporate rather than their division vice president, since functional leaders
were responsible for rewards and promotions. Only the CEO and his executive
team had the discretion to resolve disputes. All of these symptoms fed on one
another and collectively hampered execution—until a new CEO came in. The
new chief executive chose to focus less on cost control and more on profitable
growth by redefining the divisions to focus on consumers. As part of the new
organizational model, the CEO designated accountability for profits
unambiguously to the divisions and also gave them the authority to draw on
functional activities to support their goals (as well as more control of the
budget). Corporate functional roles and decision rights were recast to better
support the divisions’ needs and also to build the cross-divisional links
necessary for developing the global capabilities of the business as a whole. For
the most part, the functional leaders understood the market realities—and
that change entailed some adjustments to the operating model of the
business. It helped that the CEO brought them into the organizational redesign
process, so that the new model wasn’t something imposed on them as much
as it was something they engaged in and built together.
2. Important information about the competitive environment gets to
headquarters quickly.
 On average, 77% of individuals in strong-execution organizations agree with
this statement, whereas only 45% of those in weak-execution organizations do.
Headquarters can serve a powerful function in identifying patterns and
promulgating best practices throughout business segments and geographic
regions. But it can play this coordinating role only if it has accurate and up-to-
date market intelligence. Otherwise, it will tend to impose its own agenda and
policies rather than defer to operations that are much closer to the customer.
Consider the case of heavy-equipment manufacturer Caterpillar.
Today it is a highly successful $45 billion global company, but a generation
ago, Caterpillar’s organization was so badly misaligned that its very existence
was threatened. Decision rights were hoarded at the top by functional general
offices located at headquarters in Peoria, Illinois, while much of the
information needed to make those decisions resided in the field with sales
managers. “It just took a long time to get decisions going up and down the
functional silos, and they really weren’t good business decisions; they were
more functional decisions,” noted one field executive. Current CEO Jim Owens,
then a managing director in Indonesia, told us that such information that did
make it to the top had been “whitewashed and varnished several times over
along the way.” Cut off from information about the external market, senior
executives focused on the organization’s internal workings, overanalyzing
issues and second-guessing decisions made at lower levels, costing the
company opportunities in fast-moving markets. Pricing, for example, was
based on cost and determined not by market realities but by the pricing
general office in Peoria. Sales representatives across the world lost sale after
sale to Komatsu, whose competitive pricing consistently beat Caterpillar’s. In
1982, the company posted the first annual loss in its almost-60year history. In
1983 and 1984, it lost $1 million a day, seven days a week. By the end of 1984,
Caterpillar had lost a billion dollars. By 1988, then-CEO George Schaefer stood
atop an entrenched bureaucracy that was, in his words, “telling me what I
wanted to hear, not what I needed to know.” So, he convened a task force of
“renegade” middle managers and tasked them with charting Caterpillar’s
future. Ironically, the way to ensure that the right information flowed to
headquarters was to make sure the right decisions were made much further
down the organization. By delegating operational responsibility to the people
closer to the action, top executives were free to focus on more global strategic
issues. Accordingly, the company reorganized into business units, making each
accountable for its own P&L statement. The functional general offices that had
been all-powerful ceased to exist, literally overnight. Their talent and
expertise, including engineering, pricing, and manufacturing, were parceled
out to the new business units, which could now design their own products,
develop their own manufacturing processes and schedules, and set their own
prices. The move dramatically decentralized decision rights, giving the units
control over market decisions. The business unit P&Ls were now measured
consistently across the enterprise, as return on assets became the universal
measure of success. With this accurate, up-to-date, and directly comparable
information, senior decision makers at headquarters could make smart
strategic choices and tradeoffs rather than use outdated sales data to make
ineffective, tactical marketing decisions. Within 18 months, the company was
working in the new model. “This was a revolution that became a renaissance,”
Owens recalls, “a spectacular transformation of a kind of sluggish company
into one that actually has entrepreneurial zeal. And that transition was very
quick because it was decisive and it was complete; it was thorough; it was
universal, worldwide, all at one time.”
3. Once made, decisions are rarely second-guessed.
Whether someone is second guessing depends on your vantage point. A more
senior and broader enterprise perspective can add value to a decision, but
managers up the line may not be adding incremental value; instead, they may
be stalling progress by redoing their subordinates’ jobs while, in effect, shirking
their own. In our research, 71% of respondents in weak-execution companies
thought that decisions were being second guessed, whereas only 45% of those
from strong-execution organizations felt that way. Recently, we worked with a
global charitable organization dedicated to alleviating poverty. It had a
problem others might envy: It was suffering from the strain brought on by a
rapid growth in donations and a corresponding increase in the depth and
breadth of its program offerings. As you might expect, this nonprofit was
populated with people on a mission who took intense personal ownership of
projects. It did not reward the delegation of even the most mundane
administrative tasks. Country-level managers, for example, would personally
oversee copier repairs. Managers’ inability to delegate led to decision paralysis
and a lack of accountability as the organization grew. Second-guessing was an
art form. When there was doubt over who was empowered to make a
decision, the default was often to have a series of meetings in which no
decision was reached. When decisions were finally made, they had generally
been vetted by so many parties that no one person could be held accountable.
An effort to expedite decision-making through restructuring—by collocating
key leaders with subject-matter experts in newly established central and
regional centers of excellence—became instead another logjam. Key managers
still weren’t sure of their right to take advantage of these centers, so they
didn’t. The nonprofit’s management and directors went back to the drawing
board. We worked with them to design a decision-making map, a tool to help
identify where different types of decisions should be taken, and with it they
clarified and enhanced decision rights at all levels of management. All
managers were then actively encouraged to delegate standard operational
tasks. Once people had a clear idea of what decisions they should and should
not be making, holding them accountable for decisions felt fair. What’s more,
now they could focus their energies on the organization’s mission. Clarifying
decision rights and responsibilities also improved the organization’s ability to
track individual achievement, which helped it chart new and appealing career-
advancement paths.
4. Information flows freely across organizational boundaries.
When information does not flow horizontally across different parts of the
company, units behave like silos, forfeiting economies of scale and the transfer
of best practices. Moreover, the organization as a whole loses the opportunity
to develop a cadre of up-and-coming managers well versed in all aspects of the
company’s operations. Our research indicates that only 21% of respondents
from weak-execution companies thought information flowed freely across
organizational boundaries whereas 55% of those from strong execution firms
did. Since scores for even the strong companies are pretty low, though, this is
an issue that most companies can work on. A cautionary tale comes from a
business to-business company whose customer and product teams failed to
collaborate in serving a key segment: large, cross-product customers. To
manage relationships with important clients, the company had established a
customer-focused marketing group, which developed customer outreach
programs, innovative pricing models, and tailored promotions and discounts.
But this group issued no clear and consistent reports of its initiatives and
progress to the product units and had difficulty securing time with the regular
cross unit management to discuss key performance issues. Each product unit
communicated and
planned in its own way, and it took tremendous energy for the customer group
to understand the units’ various priorities and tailor communications to each
one. So the units were not aware, and had little faith, that this new division
was making constructive inroads into a key customer segment. Conversely
(and predictably), the customer team felt the units paid only perfunctory
attention to its plans and couldn’t get their cooperation on issues critical to
multiproduct customers, such as potential trade-offs and volume discounts.
Historically, this lack of collaboration hadn’t been a problem because the
company had been the dominant player in a high-margin market. But as the
market became more competitive, customers began to view the firm as
unreliable and, generally, as a difficult supplier, and they became increasingly
reluctant to enter into favorable relationships. Once the issues became clear,
though, the solution wasn’t terribly complicated, involving little more than
getting the groups to talk to one another. The customer division became
responsible for issuing regular reports to the product units showing
performance against targets, by product and geographic region, and for
supplying a supporting root cause analysis. A standing performance
management meeting was placed on the schedule every quarter, creating a
forum for exchanging information face-to-face and discussing outstanding
issues. These moves bred the broader organizational trust required for
collaboration.
5. Field and line employees usually have the information they need to
understand the bottom-line impact of their day-to-day choices.
Rational decisions are necessarily bounded by the information available to
employees. If managers don’t understand what it will cost to capture an
incremental dollar in revenue, they will always pursue the incremental
revenue. They can hardly be faulted, even if their decision is—in the light of full
information—wrong. Our research shows that 61% of individuals in strong-
execution organizations agree that field and line employees have the
information they need to understand the bottom-line impact of their decisions.
This figure plummets to 28% in weak-execution organizations. For example,
salespeople would routinely enter into highly customized one-off deals with
clients that cost the company more than they made in revenues. Sales did not
have a clear understanding of the cost and complexity implications of these
transactions. Without sufficient information, sales staff believed that the back-
end people were sabotaging their deals, while the support groups considered
the front-end people to be cowboys. At year’s end, when the data were finally
reconciled, management would bemoan the sharp increase in operational
costs, which often erased the profit from these transactions. Executives
addressed this information misalignment by adopting a “smart customization”
approach to sales. They standardized the end-to-end processes used in the
majority of deals and allowed for customization only in select circumstances.
For these customized deals, they established clear back-office processes and
analytical support tools to arm salespeople with accurate information on the
cost implications of the proposed transactions. At the same time, they rolled
out common reporting standards and tools for both the front- and back-office
operations to ensure that each group had access to the same data and metrics
when making decisions. Once each side understood the business realities
confronted by the other, they cooperated more effectively, acting in the whole
company’s best interests—and there were no more year-end surprises.

Creating a Transformation Program:

The four building blocks that managers can use to improve strategy
execution—decision rights, information, structure, and motivators— are
inextricably linked. Unclear decision rights not only paralyze decision making
but also impede information flow, divorce performance from rewards, and
prompt workarounds that subvert formal reporting lines. Blocking information
results in poor decisions, limited career development, and a reinforcement of
structural silos. So what to do about it? Since each organization is different and
faces a unique set of internal and external variables, there is no universal
answer to that question. The first step is to identify the sources of the
problem. In our work, we often begin by having a company’s employees take
our profiling survey and consolidating the results. The more people in the
organization who take the survey, the better. Once executives understand
their company’s areas of weakness, they can take any number of actions. The
exhibit, “Mapping Improvements to the Building Blocks: Some Sample Tactics”
shows 15 possible steps that can have an impact on performance. (The options
listed represent only a sampling of the dozens of choices managers might
make.) All of these actions are geared toward strengthening one or more of
the 17 traits. For example, if you were to take steps to “clarify and streamline
decision making” you could potentially strengthen two traits: “Everyone has a
good idea of the decisions and actions for which he or she is responsible,” and
“Once made, decisions are rarely second-guessed.” You certainly wouldn’t
want to put 15 initiatives in a single transformation program. Most
organizations don’t have the managerial capacity or organizational appetite to
take on more than five or six at a time. And as we’ve stressed, you should first
take steps to address decision rights and information, and then design the
necessary changes to motivators and structure to support the new design. To
help companies understand their shortcomings and construct the
improvement program that will have the greatest impact, authors have
developed an organizational-change simulator. This interactive tool
accompanies the profiler, allowing you to try out different elements of a
change program virtually, to see which ones will best target your company’s
particular area of weakness. To get a sense of the process from beginning to
end—from taking the diagnostic profiler, to formulating your strategy, to
launching your organizational transformation—consider the experience of a
leading insurance company we’ll call Goodward Insurance. Goodward was a
successful company with strong capital reserves and steady revenue and
customer growth. Still, its leadership wanted to further enhance execution to
deliver on an ambitious five-year strategic agenda that included aggressive
targets in customer growth, revenue increases, and cost reduction, which
would require a new level of teamwork. While there were pockets of cross-unit
collaboration within the company, it was far more common for each unit to
focus on its own goals, making it diffi
cult to spare resources to support another unit’s goals. In many cases there
was little incentive to do so anyway: Unit A’s goals might require the
involvement of Unit B to succeed, but Unit B’s goals might not include
supporting Unit A’s effort. The company had initiated a number of
enterprisewide projects over the years, which had been completed on time
and on budget, but these often had to be reworked because stakeholder needs
hadn’t been sufficiently taken into account. After launching a sharedservices
center, for example, the company had to revisit its operating model and
processes when units began hiring shadow staff to focus on priority work that
the center wouldn’t expedite. The center might decide what technology
applications, for instance, to develop on its own rather than set priorities
according to what was most important to the organization. In a similar way,
major product launches were hindered by insufficient coordination among
departments. The marketing department would develop new coverage options
without asking the claims-processing group whether it had the ability to
process the claims. Since it didn’t, processors had to create expensive manual
work-arounds when the new kinds of claims started pouring in. Nor did
marketing ask the actuarial department how these products would affect the
risk profile and reimbursement expenses of the company, and for some of the
new products, costs did indeed increase. To identify the greatest barriers to
building a stronger execution culture, Goodward Insurance gave the diagnostic
survey to all of its 7,000-plus employees and compared the organization’s
scores on the 17 traits with those from strong-execution companies.
Numerous previous surveys (employee-satisfaction, among others) had elicited
qualitative comments identifying the barriers to execution excellence. But the
diagnostic survey gave the company quantifiable data that it could analyze by
group and by management level to determine which barriers were most
hindering the people actually charged with execution. As it turned out, middle
management was far more pessimistic than the top executives in their
assessment of the organization’s execution ability. Their input became
especially critical to the change agenda ultimately adopted. Through the
survey, Goodward Insurance uncovered impediments to execution in three of
the most influential organizational traits:
Information did not flow freely across organizational boundaries.
Sharing information was never one of Goodward’s hallmarks, but managers
had always dismissed the mounting anecdotal evidence of poor cross-divisional
information flow as “some other group’s problem.” The organizational
diagnostic data, however, exposed such plausible deniability as an inadequate
excuse. In fact, when the CEO reviewed the profiler results with his direct
reports, he held up the chart on cross-group information flows and declared,
“We’ve been discussing this problem for several years, and yet you always say
that it’s so-and-so’s problem, not mine. Sixty-seven
percent of [our] respondents said that they do not think information flows
freely across divisions. This is not so-and-so’s problem—it’s our problem. You
just don’t get results that low [unless it comes] from everywhere. We are all on
the hook for fixing this.” Contributing to this lack of horizontal information flow
was a dearth of lateral promotions. Because Goodward had always promoted
up rather than over and up, most middle and senior managers remained within
a single group. They were not adequately apprised of the activities of the other
groups, nor did they have a network of contacts across the organization.
Important information about the competitive environment did not get to
headquarters quickly.
 The diagnostic data and subsequent surveys and interviews with middle
management revealed that the wrong information was moving up the org
chart. Mundane day-to-day decisions were escalated to the executive level—
the top team had to approve midlevel hiring decisions, for instance, and
bonuses of $1,000—limiting Goodward’s agility in responding to competitors’
moves, customers’ needs, and changes in the broader marketplace.
Meanwhile, more important information was so heavily filtered as it moved up
the hierarchy that it was all but worthless for rendering key verdicts. Even if
lower-level managers knew that a certain project could never work for highly
valid reasons, they would not communicate that dim view to the top team.
Nonstarters not only started, they kept going. For instance, the company had a
project under way to create new incentives for its brokers. Even though this
approach had been previously tried without success, no one spoke up in
meetings or stopped the project because it was a priority for one of the top-
team members.
No one had a good idea of the decisions and actions for which he or she was
responsible.
The general lack of information flow extended to decision rights, as few
managers understood where their authority ended and another’s began.
Accountability even for day-to-day decisions was unclear, and managers did
not know whom to ask for clarification. Naturally, confusion over decision
rights led to second-guessing. Fifty-five percent of respondents felt that
decisions were regularly second-guessed at Goodward. To Goodward’s credit,
its top executives immediately responded to the results of the diagnostic by
launching a change program targeted at all three problem areas. The program
integrated early, often symbolic, changes with longer-term initiatives, in an
effort to build momentum and galvanize participation and ownership.
Recognizing that a passive-aggressive attitude toward people perceived to be
in power solely as a result of their position in the hierarchy was hindering
information flow, they took immediate steps to signal their intention to create
a more informal and open culture. One symbolic change: the seating at
management meetings was rearranged. The top executives used to sit in a
separate section, the physical space between them and the rest of the room
fraught with symbolism. Now they intermingled, making themselves more
accessible and encouraging people to share information informally. Regular
brown-bag lunches were established with members of the C-suite, where
people had a chance to discuss the overall culture-change initiative, decision
rights, new mechanisms for communicating across the units, and so forth.
Seating at these events was highly choreographed to ensure that a mix of units
was represented at each table. Icebreaker activities were designed to
encourage individuals to learn about other units’ work. Meanwhile, senior
managers commenced the real work of remedying issues relating to
information flows and decision rights. They assessed their own informal
networks to understand how people making key decisions got their
information, and they identified critical gaps. The outcome was a new
framework for making important decisions that clearly specifies who owns
each decision, who must provide input, who is ultimately accountable for the
results, and how results are defined. Other longer-term initiatives include:
Pushing certain decisions down into the organization to better align decision
rights with the best available information.
Most hiring and bonus decisions, for instance, have been delegated to
immediate managers, so long as they are within preestablished boundaries
relating to numbers hired and salary levels. Being clear about who needs what
information is encouraging cross-group dialogue.
Identifying and eliminating duplicative committees
Pushing metrics and scorecards down to the group level, so that rather than
focus on solving the mystery of
Who caused a problem, management can get right to the root cause of why
the problem occurred.
A well-designed scorecard captures not only outcomes (like sales volume or
revenue) but also leading indicators of those outcomes (such as the number of
customer calls or completed customer plans). As a result, the focus of
management conversations has shifted from trying to explain the past to
charting the future— anticipating and preventing problems.
Making the planning process more inclusive.
Groups are explicitly mapping out the ways their initiatives depend on and
affect one another; shared group goals are assigned accordingly.
Enhancing the middle management career path to emphasize the importance
of lateral moves to career advancement.
Goodward Insurance has just embarked on this journey. The insurer has
distributed ownership of these initiatives among various groups and
management levels so that these efforts don’t become silos in themselves.
Already, solid improvement in the company’s execution is beginning to
emerge. The early evidence of success has come from employee satisfaction
surveys: Middle management responses to the questions about levels of cross-
unit collaboration and clarity of decision making have improved as much as 20
to 25 percentage points. And high performers are already reaching across
boundaries to gain a broader understanding of the full business, even if it
doesn’t mean a better title right away.

Conclusion:
Execution of successful strategy is a notorious and perennial challenge. Even at
the companies that are best at it—what we call “resilient organizations”—
just two-thirds of employees agree that important strategic and operational
decisions are quickly translated into action. As long as companies continue to
attack their execution problems primarily or solely with structural or
motivational initiatives, they will continue to fail. As we’ve seen, they may
enjoy short-term results, but they will inevitably slip back into old habits
because they won’t have addressed the root causes of failure. Such failures can
almost always be fixed by ensuring that people truly understand what they are
responsible for and who makes which decisions—and then giving them the
information they need to fulfill their responsibilities. With these two building
blocks in place, structural and motivational elements will follow.
It’s hard to balance pressing operational concerns with long-term strategic
priorities. But balance is critical: World-class processes won’t produce success
without the right strategic direction, and the best strategy won’t get anywhere
without strong operations to execute it. To manage both strategy and
operations, companies must take five steps:
1) Develop strategy, based on the company’s mission and values and its
strengths, weaknesses, and competitive environment.
2) Translate the strategy into objectives and initiatives linked to performance
metrics.
3) Create an operational plan to accomplish the objectives and initiatives.
4) Put the plan into action, monitoring its effectiveness.
5) Test the strategy by analyzing cost, profitability, and correlations between
strategy and performance. Update as necessary.
The authors identify an additional lever essential for strategy execution: the
alignment of people behind a strategy. Incentives don’t in themselves create
alignment. You also need a culture of trust and commitment. This chapter,
from “Blue Ocean Strategy: How to Create Uncontested Market Space and
Make the Competition Irrelevant” shows how to build such a culture,
particularly by establishing fair strategy formulation processes. When people
perceive a process as fair, they go beyond the call of duty and take initiative in
executing the strategy. To create a fair strategy-formulation process:
1) Involve people in the strategic decisions that affect them, by asking for their
input.
2) Explain why final strategic decisions were made.
3) Clearly state the new behaviors you expect from people and what will
happen if they fail to fulfill them.

References:
 Gary L. Neilson and Bruce A. Pasternack,
Results: Keep What’s Good, Fix What’s Wrong, and Unlock Great Performance
(Random House, 2005).

 ARTICLE
Mastering the Management System
by Robert S. Kaplan and David P. Norton
Harvard Business Review
January 2008

 BOOK CHAPTER
Build Execution into Strategy
by W. Chan Kim and Renée Mauborgne Harvard Business School Press
October 2006